INTC: Desktop Trends Weakening, Says Longbow

By Tiernan Ray

Longbow Research chip analyst JoAnne Feeney today writes that her conversations with suppliers of components for personal computers suggest to her that the second half of the year is shaping up as worse than expected, and could cause trouble for PC-related names such as Intel (INTC), Advanced MicroDevices (AMD), Nvidia (NVDA), and Intersil (ISIL).

Feeney maintains Neutral ratings on all four names.

“Contacts now see DT [desktop] units down 5-10% for the year vs. our forecast for INTC DT segment to be down 4% Y/Y in 2013,” writes Feeney.

Feeney thinks the PC trends have shifted somewhat Intel’s plans for the roll-out of new chips:

Look for a slow Haswell ramp as last year’s inventory build, following a surprisingly weak 2H, leads the industry to stick with the safer Ivy Bridgeplatform (socket compatible with Sandy Bridge, unlike Haswell) and for Haswellto make up less than 50% of desktop CPU shipments even in 4Q. Contrasting earlier reports, however, Haswell for DT (Denlow platform) looks set to launch with cautious volume in June using the faulty C1 stepping, and then to see a stronger ramp once the glitch is worked out. Still, this is more than we had hoped for in June. Caution in Ivy Bridge units still likely to constrain gross margin for INTC and contacts point to August as the more significant launch period.

Feeney thinks there is “downside risk” for AMD and Nvidia graphics processing unit (GPU) sales, given that integrated graphics are taking “significant steps forward” this year. She sees Nvidia’s GPU business declining 3% this year.

On a somewhat related note, research firmiSuppli today reported what might be a contrary data point, namely that inventories of semiconductors worldwide declined faster than expected in Q4, led by Intel, in response to weaker-than-expected PC demand:

Days of Inventory (DOI) for semiconductor suppliers in the fourth quarter declined by 5 percent compared to the third quarter—higher than the 1.5 percent initially forecast. Meanwhile, inventory value in dollar terms fell almost 5 percent—larger than the originally projected 3 percent. Semiconductor companies reduced their inventories at a faster-than-expected rate in the fourth quarter as they moved to adjust to weakening demand. Many chip suppliers demonstrated great agility in their reactions to the drop in demand. No. 1 semiconductor supplier Intel Corp. was the most aggressive, cutting its stockpiles by more than half a billion dollars—the largest decrease on a dollar basis of any chipmaker.

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There are 4 comments

MARCH 13, 2013 6:36 P.M.

calvin hosch wrote:

What about game console sales it will help make for its adm will do fine.

MARCH 13, 2013 6:39 P.M.

calvin hosch wrote:

AMD i mean sorry

MARCH 14, 2013 8:45 A.M.

Creative Themes wrote:

IPads, Nexus 7, Galaxy note type devices are taking more room everywhere, people can now do things on these devices quickly and with the benefit of portability. But the benefits of desktops will never drop, a programmer can not work for 16 hours a day on small screen sizes. Desk top gives lot more scalablity than latest mobile devices.

MARCH 14, 2013 9:59 A.M.

Office Worker wrote:

Companies need to spend some money and upgrade these antique computers. Seems like major US corporations haven't upgraded in 10 years. This computer I am on has a 386 processor in it.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.